By Nick Coleman
HONG KONG - Amid Asia's post-crisis boom it was the tiddlers among the region's stock markets that surged ahead in 2010, fuelled by a flood of easy money into emerging economies.
Among the bigger bourses Hong Kong was the standout thanks to some of the world's biggest listings.
But the past 12 months belonged to previously overlooked markets such as Colombo, Bangkok and Manila, with Mumbai also sprinting ahead.
Sri Lanka's stock index, enjoying in a post-civil war peace dividend, soared 96 per cent, making it the second best performer in the world after hard-to-access Mongolia's national bourse, according to the Colombo exchange.
Snapping at Sri Lanka's heels was Bangladesh (up 80 per cent for the year), Indonesia (46 per cent), the Philippines (up 38 per cent), Malaysia (19 per cent), Thailand (up more than 40 per cent) and South Korea (up nearly 22 per cent).
In each case local factors played a role - disturbances near Bangladesh's stock exchange in which bricks were hurled and furniture was set on fire demonstrated how local sentiment can affect that market.
But a decisive factor was foreign cash flowing into the strengthening emerging markets as investors in the West, where interest rates are at record lows, sought out better returns for their money.
The United States' decision to effectively print more cash with its quantitative easing also helped, weakening the dollar and pushing investors into strengthening Asian currencies. All of which stoked fears about destabilising short-term inflows.
"There have already, for two years in a row, been huge net inflows into the region," said Frances Cheung, a strategist at Credit Agricole in Hong Kong, referring to East Asian economies such as South Korea. "We do think money will continue to flow in, but there's also a risk of sudden reversals of flows."
Pichai Lertsupongkit, a vice-president at Thanachart Securities in Bangkok, predicted another good year ahead for his country, albeit with some uncertainty around expected elections after "Red Shirt" unrest this year.
"Liquidity in both foreign and domestic market is good and will further improve next year," he said.
However for all the exuberance about Asia, the region also holds risks - communist Vietnam is seen as a particularly vulnerable smaller economy.
And mainland Chinese stock markets have been a notable exception in the rush of positive news. They have slumped about 16 per cent in 2010 amid nervousness about a host of measures by the authorities to rein in soaring inflation - from rate hikes to property market restrictions.
While China may see more intervention by the authorities, investors are anticipating a better year to come, differing only on "how big the rally could be," said Lu Zhengwei, an economist at Industrial Bank.
Tokyo's mammoth market meanwhile was down three per cent over the year, in large part reflecting pressure on Japanese exporters from a strong yen, which in November hit a 15-year high against the dollar, and from rival exporter nations.
Masatoshi Sato, senior strategist at Mizuho Investors Securities, said the yen's strength was likely to continue exerting pressure in the first quarter of next year but things should improve later.
"The market's consensus is that toward the year-end, Japanese shares should generally advance," he said. "The market is yet to fully digest likely strong corporate earnings for the next fiscal year."
Among other larger markets, Mumbai was a notable success in 2010, rising more than 17 per cent with the help of foreign fund flows, while billionaire investor George Soros gave the exchange his vote of confidence when he bought a four per cent stake in August.
But among the major players it was Hong Kong that outshone, not for the performance of its stocks, which rose five per cent, but for the number and scale of new listings by foreign firms.
Among the firms listing shares in the city were Rusal, the first Russian firm to listing in Hong Kong, and Brazilian mining giant Vale. China's AgBank and the Asian unit of insurer AIG each scored debuts worth more than 20 billion dollars.
"In terms of performance (Hong Kong) is a great disappointment if you want to make money, but for the exchange it has been a tremendous year because Hong Kong leads the world," said Francis Lun, general manager at Fulbright Securities.
source - business.asiaone.com
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